During the 12 months ending in February 1998, the Midwest added 450,000 new jobs, a 2-percent gain. The services and trade sectors provided the largest number of new jobs. Detroit's building boom will continue in 1998 with the construction of the new $170 million Tigers baseball stadium and three casinos. In Evansville, Indiana, Toyota Motor Corporation's $500 million plant expansion will add 1,000 jobs, bringing total employment at the plant to 2,300 by the year 2000. Ohio steel producers are adding capacity in response to strong orders from automobile manufacturers. Federal Express Corporation will build a $50 million distribution facility at O'Hare Airport and plans to hire 1,300 workers in the Chicago area.
Housing construction in the region also strengthened during the first quarter of 1998, boosted by the mild Winter and low mortgage rates. Building permits were issued for 35,264 single-family houses in the first quarter of 1998 compared with 30,420 houses for the same period in 1997, an increase of 16 percent. All States and the largest metropolitan areas in the region reported gains. Shipments of manufactured homes to Midwest dealers were up 13 percent (to 5,175 units) over February 1997's level. In Wisconsin, the city of Milwaukee is using manufactured homes to help provide affordable housing and revitalize the Lindsay Heights area near downtown Milwaukee. The area will have 100 manufactured homes priced between $75,000 and $85,000, the community's first new housing in more than 10 years.
Minneapolis-St. Paul's sales housing market continues to benefit from a healthy economy and increased consumer confidence. Single-family building permits were up 13 percent to 2,715 units in the metropolitan area in the first quarter of 1998, compared with 2,402 units in the first quarter of 1997. New townhomes in a variety of price ranges are being developed in the riverfront area near downtown Minneapolis and on the old Burlington Northern Railroad properties just northwest of downtown. The Builders Association of the Twin Cities reported heavy traffic of prospective buyers at the Parade of Homes Spring Preview held in March 1998.
Increased demand for sales housing and tight market conditions in a number of Chicago neighborhoods has sparked unprecedented bidding wars. Many homes in the most desirable areas are selling well above the list prices. Residential housing construction in downtown Chicago is booming, fueled by new office workers, first-time buyers, and empty nesters. Appraisal Research Counselors' first-quarter 1998 survey of downtown development activity reported that 4,000 new housing units were added to the market in 1997, and another 2,600 new townhomes, condominiums, and apartments were expected to come on line in 1998. Similar development is occurring in neighborhoods west and south of the Loop.
Ohio's sales housing markets are also showing strength. Existing home sales in Cleveland during the first quarter of 1998 totaled 4,080, a 12-percent increase over first-quarter 1997 volume. Builders in the Columbus and Cincinnati areas have increased single-family building permit activity by 17 and 9 percent, respectively, in the first quarter of 1998.
The Detroit-Ann Arbor area's growing economy has stimulated strong demand for new and existing homes throughout the metropolitan area. The Building Association of Southeast Michigan expects that home construction in 1998 will equal the 17,000 new units completed in 1997, one of the best years so far for homebuilding in the 1990s.
Rental housing markets throughout the Midwest have held steady, with apartment occupancy in the 92- to 97-percent range. The number of multifamily housing units permitted in first-quarter 1998 was 12 percent below the same period in 1997. More competitive conditions in the Indianapolis area resulted in a 27-percent decrease in the number of multifamily units permitted through the first quarter of 1998. Activity in the Cincinnati-Hamilton area was down by almost two-thirds, but local builders expect another strong year for apartment construction in 1998. A March 1998 survey of 18,800 apartment units in the Cincinnati area by West Shell Commercial Corporation showed apartment vacancy rates in the 4- to 6-percent range compared with 5 to 7 percent in March 1997. Although Minneapolis- St. Paul's tight rental market has encouraged some developers, housing production remains historically low.
According to recent survey by Appraisal Research Counselors, the tight downtown Chicago rental market will likely see the addition of 2,300 new units over the next 2 years. The downtown market has not seen this much activity since the mid-1980s. A January 1998 survey of 98,000 apartment units in the Chicago metropolitan area by Grubb and Ellis Corporation showed 96-percent occupancy, up 1 percentage point from 1997. However, in west suburban Aurora-Naperville, rent concessions were deeper and more widespread than last year, according to a March 1998 survey of new apartments by Wescap Commercial Services.
Downtown Cleveland continues to experience strong demand for loft apartments, particularly in the Warehouse District, where lease-up rates for new properties are running about 15 units per month. Developers in the Detroit area are also showing greater interest in converting older office and retail buildings to loft apartments. The Greater Downtown Partnership's November 1997 study showed that 1,500 lofts were planned for the area. In Milwaukee, several new loft apartment developments opened in January 1998 to strong market response, with one- and two-bedroom units renting for $750 and $1,250 per month, respectively.
Spotlight on Grand Rapids-Holland, Michigan
The Grand Rapids metropolitan area has a strong and well-diversified economy. Employment growth averaged 3 percent annually over the 2-year period through February 1998, and unemployment averaged about 4 percent. The population in the four-county metropolitan area approached 1 million in 1997, a modest 9-percent increase since the 1990 census.
Developers are showing interest in downtown Grand Rapids. Since 1994, the downtown area has benefited from $226 million in commercial developments, and $184 million has been committed to developments for 1998 and 1999. The opening of the $75 million Van Andel Arena and other recreational and entertainment facilities in 1996 spurred housing and commercial construction. Plaza Towers, a $90 million renovation project, included condominium units selling for between $150,000 and $300,000 and a 200-room Marriott Hotel. Another developer is converting 10 vacant buildings near the arena to rental housing units, restaurants, retail shopping areas, and office space; when completed in 1999, Cherry Street Landing will have 100 apartments and townhomes renting from $600 to $1,100 per month. Construction of a $50 million medical research institute will begin in the Spring of 1998, and construction of Grand Valley State University's new $55 million business school began recently.
The market for sales housing in the Grand Rapids area has been solid for the past 4 years, paralleling the growth in the local economy. From 1991 through 1993, an average of 4,200 single-family building permits were authorized annually; this increased to an average of 5,600 permits annually from 1994 through 1996. Permit activity in 1997 slipped a little to 5,400 single-family permits, but single-family permits in first-quarter 1998 were up 9 percent over first-quarter 1997. Local sources report that new home demand has been strong throughout the metropolitan area, with homes priced between $140,000 and $200,000 being the most popular. The Grand Rapids Area Association of REALTORS® reported that 1997's sales of 8,905 existing homes were only slightly below record sales of 9,051 homes in 1996. Activity remained brisk through February 1998. The median sales price of existing homes was $93,600 in 1997, up 7 percent from 1996.
Grand Rapids' rental housing market is balanced, with apartment vacancy rates in the 4- to 6-percent range. An owner of 4,500 apartment units reported 95-percent occupancy as of March 1998, compared with 93 percent in March 1997. Multifamily housing permits averaged 1,575 units per year from 1994 to 1996 and increased to 1,900 units in 1997. The fast-growing, outlying suburbs have seen most of the new apartment development. Absorption of new apartments during the past 2 years has been good, averaging 10 to 12 units per month in most developments.
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